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Slippage in the Conservation Reserve Program or Spurious Correlation? A Rejoinder
Author(s) -
Roberts Michael J.,
Bucholz Shawn
Publication year - 2006
Publication title -
american journal of agricultural economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.949
H-Index - 111
eISSN - 1467-8276
pISSN - 0002-9092
DOI - 10.1111/j.1467-8276.2006.00875.x
Subject(s) - spurious relationship , conservation reserve program , economics , instrumental variable , hausman test , slippage , econometrics , geography , statistics , fixed effects model , panel data , mathematics , financial economics , archaeology , agriculture
The Conservation Reserve Program (CRP) pays farmers about $2 billion per year to retire cropland under ten‐ to fifteen‐year contracts. Recent research by Wu (2000) found that slippage—an unintended stimulus of new plantings—offsets some of CRP's environmental benefits. In a comment on Wu, we argued CRP enrollments were endogenous and confounded by omitted variables. In his reply, Wu (2005) used results from a Hausman test to argue that CRP enrollments are exogenous. In this rejoinder, we explain why the candidate instrument (erodibility) is likely confounded by omitted variables, so Wu's use of the Hausman test is uninformative.